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4 8 Localities Experienced Further Deterioration in FY 11 Budgeted General Fund Revenues 4 Estimated FY 2010Budgeted FY 2011% Change City of Charlottesville$104,222,137$103,978,751-0.2% City of Hampton$240,841,997$243,294,8941.0% City of Harrisonburg$81,532,674$84,484,9443.6% City of Hopewell$36,619,660$36,384,487-0.6% City of Lynchburg$154,062,910$153,813,145-0.2% City of Martinsville$17,541,566$17,901,0542.0% City of Norfolk$473,663,122$482,609,2001.9% City of Petersburg$78,500,000$77,070,000-1.8% City of Portsmouth$218,226,531$218,361,3900.1% City of Richmond$512,074,636$497,274,255-2.9% City of Roanoke$187,735,000$186,996,000-0.4% City of Staunton$45,644,000$43,750,000-4.1% City of Winchester$69,000,000$68,806,000-0.3% VFC Subtotal$2,219,664,233$2,214,724,120-0.2%

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77 Employee Morale, Salaries and Benefits Top Future VFC Budget Concerns CharlottesvilleHave own retirement plan - costs are increasing dramatically next few years - if we cannot provide raises for a third year in a row, the impact of that on employee morale. Managing expectations for large capital requests that are not all "needs" but are politically "popular“. HamptonBiggest expenditure concerns involve the lack of funds to give employees salary increases, increasing health care and benefit costs. HarrisonburgUnfunded capital needs and lack of a pay raise for employees. HopewellEmployee salary adjustments LynchburgVRS rates, competitive pay for staff, debt service, infrastructure maintenance MartinsvilleIncreased cost to provide citizens with the level of services they're accustomed to in light of reductions in staff. NorfolkEmployee benefits - retirement and healthcare; operating impact of new capital projects opening up (Light Rail); debt service Petersburg1) Education, particularly replacement of federal stimulus funds used for operating expresses; 2) absorption of new debt service PortsmouthRestore employee raises/increases in tough economic times; Continuing to fund OPEB unfunded actuarial accelerated liability. Increase cash (pay go) funding for CIP Projects RichmondPrimarily the cost of healthcare and retirement costs, both of which are somewhat out of our control. They seem to be the major drivers of our expenditure increases. RoanokeLocal support of education, given decline in state funding StauntonFederal & state mandated services, social services, CSA, etc., health insurance, VRS WinchesterUnforseen building maintenance issues and information technology costs currently not budgeted.

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88 Federal State Local FY 07FY 08FY 09FY 10 Local Governments Are Reducing Their Workforce

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10 State Budget Issues for 2011 Session Don’t anticipate significant local aid budget restorations, even though FA anticipates about $300-350 million in new GF revenue/balances for 2010-12. -About $250 mil. from revised revenue forecast and about $50-100 mil. available from FY 2010 agency year-end balances. - Budget “needs” include $100-200 million for increased Medicaid utilization, and $200-300 mil. in public safety, higher education, and other health and human service needs. Gov also favors add’l discretionary economic development program funding. -Latest FMAP extension for Medicaid fell short by about $137 million -- pressure to undo contingent appropriation cuts and make providers whole. -$249 million in federal “Jobs” bill education funding to local schools could potentially be used to offset state GF appropriations which could be directed to other priorities (e.g., Medicaid, VRS teacher contributions). Election and re-districting year will make for “interesting” session. -Proposals from economic development/job creation commission include corporate tax rate, BPOL, M&T changes, etc. -Impacts from Government Reform Commission and ABC privatization proposal?

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16 2010-12 VRS Teacher Rates May Triple in Future Biennia 2012-2014: “In setting the employer retirement contribution rates in subsequent biennia, the Board shall calculate a separate, supplemental employer contribution rate that will amortize the FY 2011 and 2012 contribution shortfalls over a 10-year period using the Board's assumed long-term rate of return. The Governor shall include funds to support payment of such Board-approved, supplemental employer contribution rates in the budget submitted to the General Assembly.”

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19 VFC Localities Should Plan On Tough Budgets for Foreseeable Future Federal relief efforts are ending. Meaningful increases in state aid will be hard to come by for at least several biennia. While a double-dip recession is not likely, job growth and a real estate recovery will likely be slow, therefore: -Slow increases in real estate assessments; -And slow growth in most other local taxes. -VFC cannot afford reductions in local revenue authority (e.g., BPOL and M&T).